Permanent Equity: Investing in Companies that Care What Happens Next

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Green Grass, Gratitude, and Things Being Hard

Anything worth doing is going to be hard. Let me repeat: no matter how simple, easy, or straightforward something appears to be, it will be difficult. In the beginning, it’s just not always obvious why.

As someone who has tried to start more companies than I can currently recall, the allure of newness is tantalizing. The concept is always simple and the path to success direct. “We’ll create a platform that connects advertising agencies with subcontractors. There’s an ocean of small shops starved for work and agencies are always looking for the right resources. How could this not work?” Two years and hundreds of thousands of dollars later, we gave up. It was brutal.

I could tell you similar stories about forays into online publishing, automated stock market investing, personalized health, or the speaking industry. Each company was a complete failure, but for completely different reasons. Yet the pattern was the same: 1) it looks easy, simple, and straightforward; 2) develop a game plan and build the product; 3) start to see nuances, realizing things will be significantly more difficult and expensive; 4) grind, grind, grind; 5) come to the conclusion that it won’t pan out; 6) close up shop and mourn.

The truth is that life is complicated, made even more so by our own weaknesses, biases, and prejudices. Despite all my failures, and a few successes, I don’t feel well-equipped to predict the ingredients for success, let alone the end product.

What I know to be a fact is that we’re predisposed to see greener grass all around us, discounting what we have. I know the world looks a lot simpler at 40,000 ft. than in the trenches. I know there are a plethora of ways to fail and success is highly elusive. I know that failure can be instructive, but is usually situation-dependent, making it difficult to port over many “lessons-learned.”

I’ve recently watched this play out with a startup that has experienced a moderate amount of success, yet was considering a pivot. About two months ago, the founder determined that a tangential path would be more fruitful and her explanations revolved around the opportunity. It’s a bigger market. There’s less competition. A chunk of their code base can be re-used, etc.

When I asked her to invert her thinking and consider all the reasons she wouldn’t be successful, she came up blank. In fact, she got frustrated because, “I just didn’t get it.” Her idea isn’t a bad one; it’s just new. Her opportunity cost was high, considering she was currently operating a company that was on the verge of sustainability and that’s no small feat.

She pivoted her organization and the results have been mixed. They have some early interest, but no one has given them money. The business she moved away from is withering faster than she estimated, leaving her without a backup plan. There has been a rash of unforeseen challenges that have cropped up. Her appraisal of the situation is that it’s far more complicated than she imagined.

Seeing complexity is the point. It means you understand the dynamics that will affect success or failure. It means you’re not flying completely blind. It means you have tempered expectations and aren’t relying upon a cascade of miracles for success. Things never play out how you’d expect, but start with the fact that everything worth doing will be hard. There are no exceptions.

 

This post was originally published on Forbes. 


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